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Is Dropshipping Worth it in 2022? - The Most Comprehensive Analysis

Arya Shaw
2022/10/16 15:10

is dropshipping worth it

Introduction:

With the ever-changing landscape of eCommerce, it can be difficult to determine if the dropshipping industry will still be a viable business model. Will there be changes to shipping rates? Will the eCommerce platforms always support dropshipping business model? What about the competition?


Dropshipping is a business model in which eCommerce entrepreneurs sell products without carrying any inventory. Dropshipping suppliers as well as the product supplier will take responsibility for the inventory.


When store owners receive an order from a customer, the dropshipping suppliers will ship the products directly to the customer's door. Dropshipping app lets you add products from multiple suppliers into your shop to fuel your product offering.


In 2021 and 2022, dropshipping saw a massive surge in popularity due to the COVID-19 pandemic. With brick-and-mortar stores closed, people turned to shopping at the online store out of necessity. This increase in online dropshipping store created opportunities for entrepreneurs to start dropshipping businesses.


Then here comes the main question we want to discuss in this post. Is dropshipping worth it in 2022?


    Table of Content

       1. Why is Dropshipping so Popular?

       2. Things to Make You Rethink Before Dropshipping

       3. How Long Does Dropshipping Take You to Succeed?

       4. Is it trouble to get into Dropshipping?

       5. Comprehensive Comparison for you to do self-test

       6. Damage Control System


Why is Dropshipping so Popular?

According to google trends data, the dropshipping industry is worth $197 billion in 2022, almost an increase of 53% compared with 2020. And someone predicts that this number will up to $500 billion by 2027. Google trends are reliable when proofing things, so based on the data above, we can say yes to the question: is dropshipping worth it?


Shopify dropshipping has developed rapidly in recent years and appears frequently in front of the public. In the tuyere of the global dropshipping market, most of the dropshipping suppliers make a lot of money. Give the public the impression of "dropshipping is profitable". We will give several tips for making dropshipping profitable for vendors.


COVID-19 is definitely the meritorious hero for boosting dropshipping business. Data shows that 52% of dropshipping consumers turned to buying online cause of the pandemic.


Dropshipping has become popular because it's a low-risk way to start an online business. Numerous online stores run based on the dropshipping business model. You don't need to invest thousands of dollars in inventory, and you can test out products without carrying any risk.


In conclusion, dropshipping is something that has a low barrier to entry, and you don't need to spend money like numerous to boost your business. It's a low risk business model. So dropshipping is very popular among first-time entrepreneurs and those with a limited budget.


As a profitable business, dropshipping is one of the best options if you're looking to start an online business with little money.


Another reason dropshipping is so popular is that it's a simple business model. There are no complications, and you don't need to worry about managing inventory or shipping logistics. All the tedious issues will be handled by reliable suppliers. It's easy to start, and there's a huge opportunity to scale your business quickly.


Things to Make You Rethink Before Dropshipping

While dropshipping may seem like a perfect business model, you should consider a few things before starting a dropshipping business. Many people rush into a new industry without doing research, resulting in losses.


Ruizhi sourcing doesn't want things like this to happen to our clients. So we listed several tips that you need to pay attention to before you own your dropshipping stores. In the following paragraph, we will discuss the question "is dropshipping worth it in 2022" more deeply to help you do your online shopping more efficiently.


In the meantime, we will analyze the possible negative effects of dropshipping business. Let's see what you need to think about before starting your own business.

Dropshipping is not as easy as you think it is

Youtube, Facebook, or any other websites related to online business will tell you that dropshipping is the easiest way to start your own business, whether it's a big or small business.


However, dropshipping model is not as easy as this. First, you need to find a reliable dropshipping supplier. Different suppliers take charge of different dropshipping products. Product quality is very important, if you want to sell high quality products to maintain your relationship with your online consumers, you need to find suppliers who will do strict quality control for you.


It would be best if you put in a lot of hard work and dedication to be successful in dropshipping. It's not a get-rich-quick scheme; it will take time and effort to get dropshipping success and become successful dropshippers.


In addition, it would help if you were good at marketing, and since you're selling products and running online shops based on the dropshipping business model, you must have excellent customer service skills. Or the customer service issues will come across with your customer orders. Never let poor customer service bother your online consumers. Customer support is everything when doing business.


Always work with a reliable dropshipping supplier, one that is reliable has good quality products, and can ship orders quickly. Slow shipping times will also impact your dropshipping business.

Dropshipping offers low-profit margins.

When we talk about doing business, what are we talking about? That is how many profit margins can you get. And how many profit margins we can get is also an important factor to influence our answer to whether is dropshipping worth it in 2022.


The average profit margins in dropshipping are around 10%. This means that for every $100 you make in sales, you can expect to earn about $10 in profit. The low-profit margins of the dropshipping business model are due to the fact that there are so many go-betweens involved in the dropshipping process.


The dropshipping journey is not easy. You must factor in the cost of goods, shipping, marketing, and other expenses. Though there are numerous dropshipping niches in the dropshipping space, the low-profit margins can make it challenging to scale your business, as you need a high sales volume to make a decent profit. 


You may see that there are many cases of people who make Amazon dropshipping profitable or make Shopify dropshipping successful. While dropshipping works for some people doesn't mean that dropshipping works for all of us.


Before we determine to get into dropshipping market we need to do a lot of market research. What dropshipping niches to sell on your online store? So many eCommerce platforms on the Internet which one should you choose? How to build your dropshipping store? And successful dropshippers should know how to do digital marketing to expand the popularity of their dropshipping store.

The eCommerce Industry is Highly Competitive.

Business is full of competitiveness, not to mention dropshipping model. Lots of people want to earn money based on eCommerce store, but not everyone can make it successfully. 


The competition is real, and it's getting harder to let your dropshipping store stand out from the crowd, especially since eCommerce and dropshipping stores have become more in demand. When everyone is dropship products similarly from similar suppliers, it's tough to differentiate your store, even the production process can not tell the difference.


With so many trivial details in the world of dropshipping, you need to play harder and harder to make it the tool for you to earn money. Some experts may even know how to do search engine optimization to boost their business.


This is why it's crucial that you choose the right eCommerce platform, offer unique products and expedited shipping, focus on building a solid brand, and provide excellent customer service.

Quality is out of your control.

Quality control is important when you buy and sell. Dropshipping means you have no control over the quality of the products you sell. This can be a big problem as it's likely that you will get some negative reviews if the product is not up to par. You need to be able to fix any issues quickly and efficiently to maintain a good reputation since you're competing with everyone else.

After-sales are common

It's not uncommon for customers to request refunds or returns after receiving their orders. This is especially true if the products are not as described or if they're damaged. Dealing with these requests can be time-consuming and cut your profits. You need a return policy and be prepared to handle these requests quickly and efficiently.

Since you're not in control of the shipping process, you might also have to deal with many customer service issues. If there are problems with the product, delivery, or anything else, the customer will come to you for help. It may take up a lot of time and can be frustrating, especially if you're unprepared.

Shipping Price

The shipping price is one of the customers' most significant concerns when shopping online. If your shipping prices are too high, you will likely lose customers. However, if your shipping prices are too low, you will end up eating into your profits; finding a happy medium that offers competitive shipping prices while still profitable would be best.

Inventory issues

If you're not careful, inventory issues can eat into your profits. It's imperative to track your inventory levels and reorder products before you run out. If you run out of stock, you will lose sales, and if you have too much stock, you will tie up your capital in inventory.

Supply Chain issue

A broken supply chain can wreak havoc on your business. If your supplier makes a mistake and ships the wrong product, you will have to deal with the customer service issue.

If there is a delay, you must communicate this to your customers. If your supplier is out of stock, you will lose sales. A broken supply chain can cause a lot of frustration and headaches, so you need to be prepared to deal with these issues.

You Might Not Be Making as Much Money as You Think

Dropshipping is a low-margin business, which means you might not be making as much money as you initially thought. Most dropshippers only make around 10% profit on each sale. To be successful with dropshipping, you need to focus on scaling your business and making more sales.

You'll Need to Invest Time in Marketing

To succeed with dropshipping, you need to drive traffic to your store through marketing. It is a time-consuming process and can be costly if you don't know what you're doing. If you're not willing to invest time and money into marketing, dropshipping might not be your right business model.

How Long Does Dropshipping Take You to Succeed?

Dropshipping is a legitimate business model, but it takes time and effort to succeed. It takes most people 6-12 months to generate a significant income with dropshipping. So if you're looking for a quick and easy way to make money, dropshipping is not for you.

 

You will likely be working long hours for the first few months as you get your store set up and start driving traffic to it. It will not be long until you start making sales, depending on your market strategy and the effort you put in.

 

Once you're out there, you will need to invest time into scaling your business. It will probably happen around the 6th month when you will start seeing a significant investment return. After that, it is all about scaling and tweaking your marketing efforts to drive more traffic and sales.

Is it trouble to get into Dropshipping?

While you can make money with dropshipping, starting up a dropshipping business can be challenging. You have to consider the following and see if it's worth getting into dropshipping:

 

● Find the right products. You need to find products in high demand that you can source at a reasonable price. Since the competition is high, choosing an expensive product might be the best idea, but you cannot also compromise quality.

 

● Build a great website. Your website is your store; it needs to look professional and be easy to use. If your website is complicated and poorly designed, you won't attract customers who might visit your competitor's site. A clean and user-friendly website is essential for dropshipping. However, it can be time-consuming to create one or expensive to hire someone to do it for you. Or you can use Shopify to help you build your website. 

 

● Get traffic to your website. Even if you have a great website, you need to get traffic. The most common way to do this is through Google Ads or other paid traffic sources. However, this can also be expensive, and you might not have the budget for it starting out. Even if you have the money for it, the payback is usually long because getting results from paid traffic can take time.

 

● Provide excellent customer service. Since you're not in control of the product, you need to ensure that your customers are happy with the service they're getting from you. It means being responsive to their inquiries and going above and beyond to solve their problems. If you fail to provide good customer service, you will lose customers, and your business will suffer.

 

● Get the word out. No one will know about your website unless you market it. It is another expensive move, but it could be the most important one. You need to get the word out about your website and what you sell. The most common way to do this is through social media, but it can also be through influencer marketing, content marketing, or even offline marketing. You must find ways to get the word out about your website without breaking the bank.

Comprehensive Comparison for you to do self-test:

If you're still undecided if you'll take the dropshipping path, let's take a bit comprehensive Comparison so you can evaluate your decision:

 

Suppose an angry and frustrated client called you in the middle of the night because they received a slightly different product than what they ordered on your site. It's something that most likely wouldn't happen frequently, but do you feel it's reasonable for the customer to do that? What if the fault was on the customer's end? Dropshipping is for you if you're in the following situation and find it bearable.

 

What if a product you were selling became so popular that your supplier ran out of stock? How would you deal with the angry customers who expected to receive their orders on time? Some people couldn't wait, so they started pulling off their orders. Would this make you panic? Do you have a damage control system? Dropshipping is for you if you're in this situation and can manage this sort of trouble.

 

What if a product you were selling was no longer available from the supplier? What would you do then? Would you stop selling that product or look for another supplier who can provide you with the same product? If your answer is the latter, then dropshipping is definitely for you.

 

What if, at the end of the month, you get to have so little profit that you can only support the business, but you can't even pay yourself? Would you find it reasonable to continue with dropshipping? If yes, then this business model is for you.

 

What if a supplier makes a mistake and ships the wrong product to your customers? What would you do in this case? If you're willing to shoulder the responsibility and take charge of contacting the supplier and asking for a replacement, then dropshipping is for you.

 

Otherwise, if these situations make you uncomfortable and you would rather not deal with the consequences, it's best to find another business model. As mentioned, dropshipping is a practical and reasonable business model, but it's not for everyone.

Damage Control System

It is always better to have a damage control system in place to handle any unexpected issues that may arise. It will help keep your customers happy and prevent negative reviews or feedback about your business. Here are some tips for setting up a damage control system:

 

1. Have a dedicated customer service team in place. This team should be able to handle customer inquiries and complaints quickly and efficiently. You can start with a small part-time staff but will eventually have to increase the team size as your business grows.

 

2. Set up a ticketing system so all customer inquiries can be tracked and addressed on time. Tickets are a more systematic approach to customer service and will help you keep track of all the issues that need to be resolved.

 

3. Have a clear Returns and Refunds policy in place. It will let customers know what to expect if they are unsatisfied with their purchase. Make sure to include all the details, such as return shipping costs, refund timelines, etc.

 

4. Offer discounts or coupons to customers who have had a bad experience. It will show them that you are willing to make things right and keep them as satisfied customers.

 

5. Keep an open line of communication with your suppliers. This way, you can quickly resolve any issues with your selling products. Problems often happen because of the product and seldom because of the shipping, so it is necessary to have responsive and responsible suppliers to ensure a smooth dropshipping business operation.

 

6. Always aim to over-deliver on your promises, even for the reimbursement or return of the product. It will leave a good impression on your customers and encourage them to do business with you again.

 

7. Have a contingency plan in place for when things go wrong. It will allow you to adapt and find solutions to problems that may arise quickly. It is always safe to expect the worst and be prepared for it so that you can minimize the impact of any adverse situation.

 

8. Finally, always take responsibility for your actions. It is the most important thing to remember in any business, primarily dropshipping. Your customers trust you with their orders and expect you to deliver on your promises. If something goes wrong, take responsibility and do whatever it takes to make things right.

 

These are just some things you must remember when setting up a damage control system for your dropshipping business. By having this in place, you will be able to quickly resolve any issues that may arise and prevent them from happening again in the future.

Final Thoughts

Is Dropshipping worth a business in 2022? It would still depend entirely on your proposition, target market, and business execution. What we can say for sure is that the Dropshipping industry has become more challenging over the last several years. The barrier to entry is higher, and the competition is fiercer. There are new players in the game who are armed with big budgets and sophisticated marketing strategies. To be successful in dropshipping, you need to offer a unique proposition that can't be easily replicated. You must also focus on building a brand and creating a loyal customer base. Finally, you need to have a streamlined business operation to operate at scale.

 

If you can do all these things, then there is a good chance that you will be successful in dropshipping. It's essential to set realistic expectations. Don't expect to become a millionaire overnight. It takes time, effort, and patience to build a successful business. But if you're willing to put in the work, dropshipping can be a very rewarding experience.

Article by:
Arya Shaw
Customer Manager:More than 2 years of experience in product sourcing
Contact with me at Linkedin
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